Mercury News Interview: Atul Kapadia of battery-maker Envia Systems

The electric car industry faces two major challenges: the high cost of batteries and their limited range between charges. Envia Systems, a startup based in the East Bay city of Newark, made a big splash in February when it claimed it achieved a milestone: a rechargeable lithium-ion battery with an energy density of 400 watt-hours per kilogram, the highest "energy density" known.

Since then, the company has been pretty quiet and has yet to announce any customers. Atul Kapadia, Envia's chairman and CEO, recently talked with this newspaper. The interview has been edited for length and clarity.

Q: You were the first investor in Envia and are now the CEO. How did you come to get involved in the company?

A: My wife and Sujeet Kumar, our co-founder and chief technology officer, were graduate school classmates at the University of Rochester, so that's how I knew him. He started the company out of the Palo Alto Public Library when he didn't have office space. I wrote the first $3 million check to help start the company. In August 2010, Envia was out of luck and money, and Sujeet asked me to come in and raise more capital. He then hired me to be the CEO.

Q: Consumer demand for electric vehicles is picking up, but it's not as robust as some had initially hoped. Some people say America still isn't "ready" for electric vehicles. How bullish are you about the electric vehicle market overall?

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A: I'm very positive. Electric vehicles represent a very big and long-term market. It's a 100-year market that will be the largest market the world has known. The bad news is that the battery technology is still expensive. The cost, usually measured as dollars per kilowatt hour, has to come down. Most electric vehicles are using consumer batteries in the car. The current cost curve for lithium-ion doesn't take you to the promised land. You need a new cost curve, which relies on a fundamentally different chemistry.

Q: The basic guts of a battery include a negatively charged anode, a positively charged cathode and the electrolyte. When a battery is fully charged, the lithium ions are concentrated in the anode. As the battery discharges, the ions flow to the cathode and current flows through the electric circuit, releasing energy. Many battery startups are experimenting with battery chemistry, and Envia has developed a cathode material based on manganese, an inexpensive metal that is key to driving down the overall cost of the battery. Why is this such a breakthrough?

A: Most cathodes use a combination of nickel, cobalt and manganese. Cobalt is a very expensive metal. We're trying to increase the energy density and decrease the amount of cobalt. We use more manganese and less cobalt.

Q: In February, Envia made a big splash when it announced it achieved a critical milestone: a rechargeable lithium-ion battery with an energy density of 400 watt-hours per kilogram, the highest energy density known. What's happened since then? Are you in commercialization?

A: We now have to prove our business model, and that means getting Envia's battery into a car. We're working with several automakers. We currently have more customer traction and partnerships in Japan than in the United States. 2013 is all about customers and proving the technology.

Q: General Motors Ventures has invested in Envia. Does that mean the first car is likely to be a Chevy Volt or some other GM model?

A: We raised cash in 2010 from GM, but our first customer won't necessarily be GM. Honda, Toyota and GM are leading the pack in terms of battery research. Having a potential customer as an investor is good in that you get feedback straight from the horse's mouth. It's bad in that other customers could perceive us as being too close to GM. Jon Lauckner, the chief technology officer of General Motors and the president of GM Ventures, is on our board as an observer. Jon excuses himself from the board whenever we are discussing other customers.

Q: The past year has been a lousy year for cleantech venture capital, but some venture capitalists say electric vehicle batteries is one bright spot. Are you fielding calls from VCs all the time? Are you actively raising money?

A: The word "cleantech" is like the word "electronics." It's too broad. I don't know what it means. The battery sector for cleantech doesn't exist. You need a success in order for there to be an ecosystem, and there are no successes. Look at A123: that didn't turn out well.

A: Tesla has done a brilliant job of managing the manufacturing problem. But fundamentally, they are still using the wrong chemistry. They cannot bring the battery cost down with the chemistry they are using.

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.

ATUL KAPADIA

Job: Founding investor, chairman and CEO of Envia SystemsAge: 45Previous jobs: Microprocessor design engineer at Sun Microsystems, working on the Spitfire chip; managing director at venture capital firm Bay Partners; served on the boards of several startupsEducation: MBA, Stanford Graduate School of Business; degree in biomedical engineering, University of BombayFamily: Married; two daughters, ages 8 and 10Residence: South San Jose

FIVE THINGS ABOUT ATUL KAPADIA

1. To relieve stress he lifts weights every day. 2. He met his wife, who has a Ph.D. in electrical engineering, when they were both at Stanford. She was a teaching assistant in one of his classes.3. He drives a Chevy Volt, which he leases.4. He has a 45-minute meeting every day with Envia's founder and CTO.5. A former venture capitalist, he loves being a CEO and prides himself on the fact that Envia has never lost an employee.